Mr. ThreeYear and I will have been married for fifteen years this May. During that time we have done a lot with our money, good and bad. Today, I’ve detailed our best money moves in our decade and a half together, and on Wednesday, I’ll share our worst money moves.
Contributing to Retirement from the Beginning
Even though Mr. ThreeYear and I didn’t max out our retirement accounts from the beginning, we did contribute to them.
While I don’t remember the exact percentage that we contributed in the early days of our first jobs in the US (in Chile, I contributed a certain portion of my income to retirement because there it’s mandated by law), I believe it was enough to get the full company match (for him) and a few hundred dollars a month (for me).
Related Reading: The Boon of Investing Early
We continued contributing to the accounts in 2008, until we adopted Dave Ramsey’s method of paying off debt. We stopped contributing to retirement for 18 months while we paid off our $38,000 in debt. Once we paid our debt off in late 2009, we began to again contribute to retirement accounts again. When we moved to New Hampshire, we again took a short break while we saved up a house downpayment, since we sold our Atlanta home at a loss in 2010. Finally, when we moved into our New Hampshire house in 2012, we started maxing out Mr. ThreeYear’s 401k (because I wasn’t working), and then started contributing heavily to my 401k once I started working.
Maxing out our 401ks is the single best financial move we’ve made, in my opinion. We’ve lowered our taxes, increased our yearly investments, and decreased our spending (because that money is no longer available to spend), all in one fell swoop. I tell friends and family members who don’t know where to “start” on their personal finance journey to start there. In my opinion, for someone who has spending issues, it’s even more important than paying off debt, because of the effects of compound interest and time (plus it forces them to spend less).
Increasing Our Salaries
When Mr. ThreeYear started a “really good” new job in Chile, right after we started dating, he made $10 an hour, and was thrilled to make so much (he made more than I did–I was salaried and made a total of $850,000 pesos per month, or about $1060US per month at the time and he made roughly $1500US). This was Chile, so it’s hard to compare that to US salaries in the Noughts, but we made very decent salaries for two young professionals in Santiago.
Related Reading: How to Be a Rockstar at Your Job
When we moved to the US in 2004, Mr. ThreeYear got a job with a Fortune 500 company through a recruiting agency, and he made $50,000 per year. We were thrilled. When I got a job making $30,000 per year, we thought we were on easy street.
But, as we learned more about salaries, we realized we were underpaid in our fields and we pushed to make more money. Mr. ThreeYear got yearly increases and increased his salary by over 20% each year (average). I also increased my salary substantially, and I had paid medical benefits, which meant we had no medical premiums to pay.
It was, ironically, during the year when Mr. ThreeYear was laid off twice that his salary increased the most. When his original company asked him to come back, he negotiated for a lot more money than he was originally making.
***Time Out*** Here’s one of the reasons that Mr. ThreeYear could be ballsy enough to do that. He had a former boss who helped him out hugely during that time by coaching him on how much he was worth (more than he was currently making). I was at his side, pushing him to negotiate for more. And in the background, were my parents, grandparents, and relatives, who we knew could bail us out financially if worse came to worst.
When we lived in Chile, even though I knew my parents could bail us out there, too, if need be, we had a more conservative philosophy regarding asking for pay raises. While I did negotiate a handsome pay raise at the university I worked for, I was much more nervous about losing my job, since there was no one we could really live with if we both lost our jobs.
The reason we were able, and have continued to be able, to be pushier, about negotiating raises, is because we had financial backers and now have enough FU money that we can back ourselves.
When Mr. ThreeYear got his job with the New Hampshire company, he negotiated once again, and was able to negotiate a much larger total package with this company. His huge salary increases did stop with his current company, though. They are much more conservative in giving raises, and while Mr. ThreeYear got the highest possible raises for many years running, that number was much less than with his previous employers. His total compensation, though, with bonus and stock included, has continued to grow each year.
When I started working again after being a stay-at-home mom for seven years, I started at a fairly low salary with a non-profit, but I pushed for raises there, and increased my salary substantially there.
When I became a teacher, my pay increased again, and I became more stringent about billing the hours I was warranted as an independent contractor, so my pay has continued to increase.
Part of the reason we’ve been able to ask for, and receive, more pay, is that we prove our worth by working hard, taking responsibility for our mistakes, and becoming the go-to person at our jobs. There’s a lot to unpack behind that sentence, including many years of expensive education that other people paid for, a work-ethic modeled by our parents (my mother-in-law worked three jobs for years), and a support network to help at home when work got busy.
Tracking Our Net Worth
We began to track our net worth in April 2011, after I started following a net worth tracking website (I can’t remember the name now). People posted their net worth anonymously, so of course I figured ours up and started posting updates. That first year, I only calculated our net worth for three months–April, June, and October. In 2012 I tracked it for four months and then in 2013, presumably when I read Your Money or Your Life for the first time, I started tracking it each month.
Related Reading: I Changed This One Habit to Save Over $11,000 This Year!
Tracking our net worth became a game, albeit a very slow-moving one. I could look at where we stacked up with people of the same age group, the same profession, and the same state. It became a game to see how fast we could stack another $100,000 on top of our net worth. How fast we could get to $1M.
I highly recommend tracking your net worth (positive or negative) as a way to shine light on what you’re doing right, and wrong, with your money. I’ve learned a lot from tracking our spending about what we’re wasting money on, and where we’ve spent to get good value (based on our own personal values). It also helps you get motivated to pay off debt quickly!
If you’d like a copy of the spreadsheet I use to track our net worth (and spending), send me an email and I’ll send you a copy.
Paying Off Debt
Without a doubt, paying off debt has been an incredible boon to our financial lives. While it wasn’t the first smart money move we made, paying off our debt has allowed us to take out a 15-year mortgage, max out our 401ks, and eliminate debt payments from our lives (except for our pesky mortgage payment of course!).
Related Reading: Freedom from Payments9
I’ve written plenty about how to pay off debt, and how we did it, specifically. At first, it seemed impossible that we’d ever be able to get out from under the mountain of credit card and car loan debt that plagued us. But budgeting helped a ton, as well as evaluating our spending with fresh eyes. A lot of the things we assumed we couldn’t live without, like yard or cleaning services, security and pest control, could go. Some, we really didn’t want to live without, even while getting out of debt, like travel.
It’s hard, a decade after the fact, to think about just how we went about paying off our debt. But last year, I realized we had gotten into more debt: two car payments and our mortgage for our apartment in Chile, that added up to over $1000 in payments each month. At the beginning of 2017 (or really, the end of 2016), I imagined what it would feel like in December of 2017 to have $1000 less in payments per month. We could save so much!
Envisioning that freedom helped me keep a laser focus during 2017, and we reached our goal. We paid off the two cars and the apartment (two years early), so we freed up over $1000 in cash flow each month. That’s part of the reason we were able to feel comfortable buying a more expensive house here in North Carolina and why I haven’t had to get a teaching job yet.
And now, we just bought a bigger car in cash, which was such an amazing feeling.
Taking Out a 15-Year Mortgage
We’ve taken out exactly three 15-year mortgages in our lives, and the one time we didn’t, for our house in Atlanta, we took a major financial hit. We took out a 15-year mortgage for our apartment in Chile that we bought back in 2004, for our house in New Hampshire, and for our current house in North Carolina.
For us, the discipline of paying down the principal faster has helped us save up more money that we would probably have been tempted to spend elsewhere. Each time we get a new 15-year mortgage, the payment feels big. But gradually, we adjust to the amount of money we have to spend, and we adjust our spending downward until we’re spending less.
Related Reading: We Got a 15-Year Mortgage. Here’s Why You Should, Too.
We’ve also made sure not to buy a house that was more than 25% of our take-home pay, although we usually don’t include taxes and insurance in that total. If we had bought a house that we had to spend close to 50% of our take-home pay on, I don’t think we could have adjusted our spending downward to make that payment doable. Has that meant that we’ve bought “less house” than we maybe wanted to at times? Yes. But it’s also meant that we didn’t make any hare-brained emotional house purchases where we stretched ourselves into financial catastrophe.
I’m glad I’m writing about our smart money moves first, because it’s going to be painful to talk about our dumb ones. But when I break the very complex field of personal finance down for people, I try to encourage them to understand that you don’t have to be good at everything in finances. You can make bad decisions and still recover, still build a large net worth and retire early or reach financial independence.
What has helped our family, and has helped other families, is focusing on making a few good BIG financial decisions that then have a waterfall effect and help you make good small financial decisions. (Working up to) maxing out your 401K, getting a fifteen year mortgage, paying off your debt. These are decisions that will have very positive financial benefits for you later on.
I’d love to hear what you consider to be your best money moves.